Downsizing: Think before you shrink your home

It pays to think things through before downsizing. Vendor Dallas Wickenden is getting ready to downsize from the Hampton house she and her family have recently sold. Photo: Michael Klein

Real estate experts are calling for homeowners to carefully consider everything from finance and equity to property type, location and hidden costs when downsizing.

Melbourne buyers’ agent and Wakelin Property Advisory director Jarrod McCabe said downsizing was not as simple as trading a larger property for a smaller one and reaping the rewards.

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He said with the market contracting, particularly in middle ring suburbs, downsizers had to do their sums financially, practically and emotionally.

“Downsizing is a two-stage process of selling the family or larger home and buying a downsized property,” Mr McCabe said.

“The key in that process is what that purchase will look like in terms of what type of property you buy and where that property is located.”

Releasing equity in the family home is a common downsizing goal, but going from the outer suburbs to the inner city could actually be an expensive move.

Mr McCabe said a common goal in downsizing was to release equity built up in the family home, but he warned that equation wasn’t as easy as it looked.

“People have the perception that they are just going to release all of this equity, but it’s not always the case,” he said.

“You may purchase a smaller block and even a smaller home, but it might be a lot more modern and just as expensive as the family home.

“It also depends on where the property is, what it is and how common that property is.

“If you go from Toorak to beachside or other areas there will be equity released of some sort, but if you go from an outer suburb to the inner city you may be going from a four-bedroom, two-bathroom home but you’re going to a higher land value area that has more competition from second-home buyers and investors, which pushes prices up.”

Mr McCabe said downsizers who had sold about 12 months ago would be in a stronger position to buy now than if they were doing both transactions in the current market.

“Particularly in the middle ring suburbs there has been a contraction as there’s not the same depth to that buyer market,” he said.

Mr McCabe said downsizers also needed to think about “changeover costs” such as stamp duty, real estate agent fees, repairs or upgrade works needed to present the home well, and marketing costs, including staging the home for sale.

He said personal finances and how the new downsized home was going to be paid for if the sale of the family home didn’t cover all the costs also needed to be carefully scrutinised. “You’re not going to get a 30-year loan and bridging finance is not cheap, so you need to really think about how you’re going to fund a loan going forward,” Mr McCabe said.

Stamp duty, agent fees, repairs and upgrade works need to be factored in as extra costs when downsizing.

CBRE residential projects director Andrew Leoncelli said the days of the single-storey, two-bedroom unit with a sunny courtyard being most popular among downsizers were over.

He said single-level apartment living was becoming increasingly popular as downsizers sought lock-up-and-leave convenience, minimal outdoor maintenance, smaller second and third bedrooms and lifestyle opportunities such as being close to the theatre and arts precincts as well as restaurants.

He said developers such as OSK Property, which was behind the mixed use development Melbourne Square at Southbank, were now specifically targeting downsizers.

“The top of the first two buildings are large, premium three-bedroom, sub-penthouse and penthouse collections targeted at mature downsizers coming from the east and southeast private school belt who want to be close to the city but not in the city,” Mr Leoncelli said.

“The downsizer market has really matured and accepted apartment living as a way of life now, particularly with the desire to downsize on space and maintenance and upsize on lifestyle.”

He said there were about 40 apartments geared at downsizers in stage one, priced from $1.37-$5.25 million.

Mr McCabe said other options downsizers could consider were buying a two-storey townhouse with a bedroom and bathroom on the ground floor, or subdividing their existing home block.

The Wickenden family have decided to tackle downsizing in stages. Dallas, pictured, and her husband Phillip have just sold the Hampton family home. Photo: Michael Klein

LOOKING FOR AN EASIER LIFESTYLE

When it comes to downsizing, the Wickenden family have decided to complete the task in stages.

Dallas and Philip, with their mid-20s children Aidan and Freya, sold their five-bedroom Hampton California bungalow at auction for $2.1 million and are now on the hunt for a three-bedroom townhouse in the bayside area.

“We are looking for a transition house, something for the next 10 to 15 years, so we can downsize in stages,” Mrs Wickenden said.

“We’re looking for an easier life. We have a big garden we have to maintain and an older weatherboard house, which is lovely, but it requires maintenance.”

Mrs Wickenden said culling 25 years of possessions and preparing to part with their neighbours was proving an emotional process.

Jellis Craig Brighton agent Simone Tindall said downsizers needed to allow themselves time to process the move psychologically as well as to find the right property.

She said there was a need for more new developments catering to downsizers’ needs for reduced land size, maintenance and even bedroom space without compromising on space.

“Downsizers still want to be able to have Christmas lunch around the large, family dining table,” she said.